Bring the organization together to say, We've done great work, we've made progress, but given the environment were now in, we're going to have to change how we're doing our transformation. Highlight the wins and share transparently where leadership made mistakes. Transformation Program Management - Critical Factors 4 Steps To A Successful Business Transformation - Forbes At 11 percent, they had an even better chance than the performance-only group of vaulting to the top quintile. You can build a plan that you can look at every single week and know specifically what is happening across the company. In addition, the overall distribution of performance shows a wider spread between leaders and laggards. While many business challenges have surfaced (or worsened) in 2023, companies should address five current business issues: Creating stability in the age of uncertainty Adapting to the future of work Adopting ESG as part of your business model Accelerating digital transformation Cultivating robust agility Transformations help companies get organized, deal with the certainty, and upskill. You should also consider what a transformation does for you. When implementing new technology to support business transformation, remember the point of that technology in the first place.Make sure that when systems are procured and implemented, your primary objectives are well understood and that only projects are funded if the value created is explicitly understood by everyone involved. The Top 20 Business Transformations of the Last Decade The latest version of BCGs transformation survey drew responses from approximately 1,000 companies representing a wide range of industries. Whats more, all-in transformations that focus on the organizations performance and portfolio appear to load the dice in favor of transformational results. As more companies pursue new technologies, a labor deficit is developing. In a downturn, the gap between winners and losers grows wider. Business Process Transformation: Definition and Strategies - Pipefy The result shows a power curve that is extremely steep at both ends and flat in the middle. The way we explain this to senior executives is that when youre parked on the side of a volcano, staying put is your riskiest move. For years now, transformation has been a catchall term for how organizations make the right moves to achieve their full potential. According to a McKinsey Global Survey, three core actions are especially predictive of transformations that capture the most value: McKinsey research also shows that the execution stageembedding transformation disciplines into business-as-usual structures, processes, and systemsis key to generating value. Decisions were made and documented live. Business transformation is the art of changing a company to improve its competitiveness and give it an edge in the market. BCG has developed a clear set of principles for companies to follow in order to increase their odds of transformation success, and those core principles are just as relevant as ever. Contributor: Susan Moore. Companies can face inflation by establishing end-to-end, actionable visibility of spending by business process, function, cost category, and business unit, as well as reducing spending. Companies can take steps to protect themselves by taking proactive measures like evaluating their data backup and recovery processes, conducting penetration testing and vulnerability scanning, and taking proactive steps to protect sensitive data and prevent cyberattacks. Business Transformation Services | Deloitte US Business and digital transformation initiatives are more than an IT investment; they are one of the top priorities across all C-suite teams and global leadership. Companies usually aim to deliver healthy financial performance and organizational effectiveness before focusing on higher growth, new strategies, and tech-enabled solutions. Unless your business is run by AI with no influence or collaboration with your workforce, you need to understand that any transformation needs to make sense for your employees. They commit to following through on the change and the role model behavior change themselves. Training and support are vital if the transformation is to be successful. The Secret Behind Successful Corporate Transformations When it comes to delivering fast results to the bottom line, its a proven recipe that works. How to Overcome Common Business Transformation Challenges - Accelare Almost all transformations are digital transformations because they require new investments in technology and tech-enabled processes. Our analysis thus far has assumed that companies started in one of the three middle quintiles of the power curvea good company earning close to its cost of capital. No matter their starting point, BCG can help. How can companies overcome the odds and achieve long-term success in a business transformation? Instead, focus on long-term recovery and restructure your needs to prevent similar shortages in the future. They often cut across the entire organization and impact many employees. By developing these two complementary sets of muscles, companies can aspire to flex them in a coordinated way, using performance improvements to carry them to the next set of portfolio moves, which in turn creates momentum propelling the company to the next level. Make this a big moment for people so that it does feel like something is shifting. While the five moves are by definition big relative to competitors, this does not mean they are brash or reckless. We hope they provoke productive and, dare we suggest, transformative discussion among your team. Read more insights from BCGs teams of experts. While the most successful transformations address most of an organizations value creation opportunities, some transformations focus on a particular theme (for example, a workforce transformation to adopt agile working methods). Catch up on the latest news and events from Accelare and our dedicated partners. This represents a sea change for managers who are used to plodding, once-a-year strategy sessions that are more focused on getting to yes and on protecting turf than on debating real alternatives. But the pace of change means that waiting to earn the right to grow is no longer the best strategic or financial option. Transformation has become a big business buzzword. Even in uncertain economic times, companies need transformations to keep moving forward. Why Cloud Box Technologies suggests embracing digital transformation But what is the minimum level of employee involvement needed to guarantee transformation success? 11 Critical Digital Transformation Challenges to Overcome (2023) This resulted in an aggressive expansion of the companys production capacity (with a capital-expenditure ratio twice as high as the industry median at that time) and a strong focus on higher-margin generics (its gross margin doubled between 2000 and 2014). Today, we work closely with clients to embrace a transformational approach aimed at benefiting all stakeholdersempowering organizations to grow, build sustainable competitive advantage, and drive positive societal impact. This doesnt mean they didnt make plans or movesonly that their moves werent big enough to reach our bar for transformational results. The 12 percent of companies in our sample that made at least one big move in both categories were rewarded with the highest odds of climbing the power curve, at 22 percent. 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Over the course of a decade, companies that followed this path nearly tripled their likelihood of reaching the top quintile of the power curve relative to the average company in the middle three tiers.2Our analysis thus far has assumed that companies started in one of the three middle quintiles of the power curvea good company earning close to its cost of capital. As organizations strive to adapt and thrive in this digital age, they'll likely encounter various challenges that must be navigated effectively. The survey data revealed two key findings on this point: Employee-centric Change Management. We call this "paving the cow path." Six keys to unlocking breakthrough value Business transformation initiatives require business leaders to rethink how the enterprise creates value todayand in the future. Identifying the right vendors can be daunting, so be sure to work with a trusted advisor through this selection process. The average company in the middle three quintiles earned less than $50 million in economic profit. What Worksand What Doesntin Transformation, Technology, Media, and Telecommunications. Today that gap can be exponential. Unless AI runs your business with no influence or collaboration with your workforce, you must understand that any transformation must make sense for your employees. In doing so, it lists six of the key reasons why transformation programs are essential for operating in today's business world. For nearly 25 years, SolarWinds has provided customers with solutions . Run and improve operations while delivering business model transformation. Overcoming the challenges of digital transformation on a global scale; Atos needed to transform more than 230 locationsincluding 12 remote overseas sitesusing software-defined wide-area networking (SD WAN) to help better prepare for the future. Why your next transformation should be all in. Leaders face an uncertain landscape. On top of that, the pandemic has made many people reevaluate their jobs, leading to mass resignations in many sectors. A complete collection of our latest thinking across industries and capabilities can be found at the bottom of the page. About one-third of US companies reallocate no more than 1 percent of their resources from year to year. Instead, the world is likely to continue to slog through the pandemic, with ongoing unexpected ramifications and challenges. The latest insights, ideas, and perspectives from BCG. Management teams are understandably distracted by the challenge of keeping operations and businesses running while also ensuring the safety of employees and customers. Why would you continue to do the same processes that got you to where you are today? When you're working with a transformation office thats constantly questioning the way work is getting done, people begin to think more critically and to challenge their way of working. What is business agility? | Adobe Acrobat Most organizations need help prioritizing which initiative to launch first because they view their organization as a sum of its parts rather than a whole. What are the Challenges of Business Transformation? While 7 percent may seem like a small number, even at a medium-size organization that can mean hundreds of employees. Many organizations adopt transformation methodologies to achieve broader strategic goals, such as creating value from ESG; making big M&A and portfolio moves; and prioritizing diversity, equity, and inclusionprinciples for greater impact. This has made parts and products harder to obtain, as well as pushed prices up (e.g., energy, grains, computer chips, oil, and so on). Learn more about McKinseys TransformationPractice. Differentiation improvement is the other performance-related move, covering innovation in products, services, and business models. Success often comes down to leadership commitment, focusing on culture, and of course, executional excellence. How Companies Can Manage a Successful Transformation | BCG Global digital transformation spending is expected to surpass the mark of 2.8 trillion US dollars by 2025! No matter their starting point, BCG can help. In our analysis, three key elements closely correlate with better performance: holistic management of change journeys, consistent leadership alignment, and employee-centric change management. Mobile and IoT devices are not immune to cybersecurity threats. The TO defines goals, models new ways of working, and ensures that the overall program and specific work streams stay on track. . To illustrate this point, consider the anecdote about Apple that UCLA business professor Richard Rumelt describes in his book, Good Strategy/Bad Strategy (Crown Publishing, 2011). Among your other priorities: build momentum, engage your workforce, and make the change personal for yourself and your company. The most successful transformations turn ideas into detailed business plans with trackable, time-bound metrics to measure outcomes. Poor resource management planning and lack of IT resources are some of the critical challenges related to digital transformation. In such a dynamic business environment, focusing on new ways of working, new capabilities, and new technologies is the way forward. There have been surprisingly few studies that set out to quantify what makes for a successful corporate transformation. Deliver a differentiated customer experience through continuous innovation. Similarly, if you improve your time to hire new candidates, but your onboarding process still takes twice as long as it should, the transformation hasn't been truly effective.PMOs must play a role in helping them organize and manage. Boston Consulting Group 2023. Whats your view? Whether you want to focus on a specific technology, digital transformation or solutions specific to your sector, we look forward to co-creating with you. Employees get confused. We also have reached the highest level of reported burnout ever. As shown in Strategy Beyond the Hockey Stick, for companies in the middle ranks of the power curve, making one or two of the five big moves increases a companys odds of rising into the top quintile from 8 percent to 17 percent; making three big moves boosts these odds to nearly 50 percent. Start big One of the most important indicators of the colossally successful transformations is the scale of the undertaking itself. Visit the future of workflow innovations. The first covers performance-related moves. Many people think about this as bureaucracy or admin, but the reality is you are embracing great process, creating muscles of consistency and discipline that ultimately create capacity in an organization. If youre in this group, how you employ the five big moves says a lot about how youre likely to fare (Exhibit 3). No matter their starting point, BCG can help. With the increased pressure from the investor community to move with speed, achieve higher returns, and boards are not willing to wait for five- or ten-year types of transformations. As we described earlier, other forces influence your odds of success in significant waysin particular, how your industry is performing. 4 Types of Business Transformation - Harvard Business Review Hunkering down isnt an option. 1. Suppose the whole point of business transformation is to radically change the business to improve the customer experience or increase value and profitability. To create Exhibit 1, we plotted the economic profit (the total profit after subtracting the cost of capital) earned by the worlds 2,393 largest nonfinancial companies from 2010 to 2014. It's critical to counteract these obstacles from the start but to do that, you have to know two things: 1) the real business transformation challenges you will face and 2) the root of the problem.In this guide, we dive deep into leaders' top 5 strategic business transformation challenges and explain proven methods to overcome them. In our analysis, three key elements closely correlate with better performance: holistic management of change journeys, consistent leadership alignment, and employee-centric change management. This is where kicking off a new year helps, but changes in the operating environment (such as rising inflation), or even milestones in the organization life cycle (such as investor conferences), can serve a similar purpose. What are the big hurdles companies face in executing a successful transformation? This is rapidly creating a world of ever-faster technological developments. - McKinsey. Companies usually aim to deliver healthy financial performance and organizational effectiveness before focusing on higher growth, new strategies, and tech-enabled solutions. We work with a variety of clients across industries to deliver unique solutions. BCG was the pioneer in business strategy when it was founded in 1963. For more on embracing such a mind-set, see the Harvard Business Review article The best companies arent afraid to replace their most profitable products, on hbr.org. Improve the odds of a successful business transformation by going all in to kick-start performance and remake your portfolio. Accelare is always looking for expertise and talent. Business Transformation & Operational Excellence Key Challenges The latest version of an annual survey commissioned by BCG has found that transformations take longer than they did a year ago, while also yielding less value and achieving lower engagement levels among leaders and employees. In our experience, the companies that are most successful at transforming themselves sequence their moves so that the rapid lift of performance improvement provides oxygen and confidence for big moves in M&A, capital investment, and resource reallocation. Change is hard, but readiness is all. As of 2020, the average lifecycle of an S&P 500 business was 21 years, and the cycle continues to shorten. April 17, 2023 | Article (4 pages) For years now, transformation has been a catchall term for how organizations make the right moves to achieve their full potential. Companies need to re-design their processes and ensure their people have the skills needed for a world where we increasingly collaborate with and work alongside capable and intelligent machines. Transformation requires large shifts in technology, business models, ways of working, and other elements that are central to a companys DNA. Real success stories from our valued customers. You're creating agency in the organization, and that improves culture and engagement scores. Customers are demanding more immersive customer experiences in the real world as well as in the metaverse. The Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva, reported that the organization had downgraded its forecast for 2.9 percent global growth in 2023. The "all in" approach to business transformation | McKinsey How? They cannot cling to the status quo or wait for conditions to become more favorable. The chief transformation officer (CTO), a C-suite role that is becoming more prominent in many sectors, is the high-level orchestrator of the transformation process. The Key to Business Transformation is Culture. Regardless of their technical maturity, any business is a group of people executing processes to deliver value to a customer. Now, data is available to quantify the challenge. For more on how to set strong aspirations and, more importantly, how to evolve them, see The numbers behind successful transformations, forthcoming on McKinsey.com, and Transformation with a capital T., Embracing transformative change requires commitment, and gaining commitment requires a compelling change story that everyone in the company can embrace. While C-suite attention is crucial, a lot more people are needed to make a transformation workoften 25 percent or more of the workforce. Some 40% of people globally are saying, We are burnt out. So, youve got this additional challenge that the people who need to do the work have high change fatigue after the last three years. Twenty-six percent of the companies made at least one big, performance-oriented move, but no portfolio moves. In that light, the survey data from transformation leaders is like a lighthouse in a storm. It also offers a repository for leaders to get help when faced with difficulties and to develop new skills. The prospect of doing both jobs at once is sobering. Our clients are feeling a lot more pressure to go fast. Ignore this and you might be shifting deck chairs on the Titanic. Learn more about McKinseysTransformationPractice.